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« Strathmore to Spin Off Non-Core Uranium Assets | Main | Stock Picking Contest: 1st Place »
Tuesday
Jul032007

Uranium Participation Corp: At a Discount

Throughout the history of Uranium Participation Corporation trading on the stock exchange, it has mainly traded above its NAV.

Uranium Participation Corp Now At a Discount

We signalled to add to your holdings when it fell to trade equal to its NAV but now it is trading below the NAV so it is an even better buy, especially as it could be a takeover target.

Unlike the uranium mining stocks and uranium exploration stocks, Uranium Participation has none of the political or operation risk associated with those industries, that is why we have it as a BUY on our uranium stocks portfolio. It has tracked the uranium price fairly well, especially over the last year. However in the past few months the stock price has failed to respond to the rises in the uranium stock price, something the stock is specifically designed to do.

We still remain bullish on the uranium price and bullish on this uranium stock as we maintain our target of $200/lb. This fall in price should not be looked at as a problem, but as an opportunity to purchase more of a quality uranium stock at a discount. It has fell off alot from its highs, and the RSI is very low, giving us a bullish signal.

In fact, any utilities or other groups wishing to purchase uranium, such as our fictional Gigantum Power Corp, should look at Uranium Participation as a good way to get their hands on some ever more precious U3O8. We are not talking about large companies purchasing a few shares as part of their basket of uranium investments, we are talking about a full blown hostile takeover of Uranium Participation.

As it is currently trading under its NAV, the buyer could afford to offer a considerable premium on the stock price and still pay roughly the current spot price. In doing this, the buyer would gain access to 4,200,000 lbs of U3O8 and 1,200,000 KgU of Uranium hexafluoride. This would be safer than hoping to score a few thousand pounds in a sealed bid auction, or signing a contract for uranium in 5 – 10 years time with the current spot price as a floor and no ceiling.

This would be the perfect opportunity for any utility that has been holding back from purchasing uranium waiting for a correction and now desperately needs large amounts of uranium, today, not in contracts for supply in years to come and many large power corporations could quite easily dish out the 800 million to 1 billion dollars needed to buy the company.

Although this is speculation, it is not without merit, but back to the facts. If you are still bullish on the uranium price as we are, then this stock is a BUY and at these discounted levels, it is an even better buy.

Uranium Participation trade as U on the TSX and has a market capitalisation of C$806.41 million.

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Reader Comments (1)

The situation is the same with Nufcor in the UK who have just announced their NAV for the end of June. With a U price of $135.5 their NAV is £4.58 - with their current mid-price of about £3.90 using simple maths (and excluding their UF6 holdings) that works out at an implied U price of about $115...

July 5, 2007 | Unregistered Commenterbob

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